NZD/USD jumps toward 0.6300 as US Dollar tumbles

Greenback drops sharply after NFP and ISM service sector.
US yield falls to multi-day lows, commodities rebound.
NZD/USD reverses from monthly lows, and trims weekly losses.

The NZD/USD has risen a hundred pips from the daily low and it is trading at 0.6290, with a solid bullish tone supported by a broad-based USD decline.

The greenback turned to the downside after the release of the Nonfarm Payrolls report that came in above expectations. After a brief recovery, it resumed the downside following the ISM Service Sector report for December that showed a larger than expected slide.

Following the numbers, US yields tumbled with the 10-year falling from 3.75% to 3.61%, the lowest level since December 20. The DXY reversed sharply from one-month highs above 105.50 to under 104.50, turning negative for the day, but still positive for the week.

The NZD/USD is looking at the 0.6300 zone and toward the next resistance that stands at 0.6310 (Jan 5 high). Above attention would turn to 0.6355/60, a critical area that capped the upside several times. A consolidation above 0.6360 should open the doors to more gains. On the flip side, 0.6250 is the immediate support, followed by 0.6215.

Technical levels


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US: The case for additional labor market weakness is clear – Wells Fargo

On Friday, the US official employment report will be released. Market consensus is for an increase in payroll by 200K. Analysts at Wells Fargo point out the demand for workers has started to roll over. They argue job openings and hiring plans have declined since the start of 2022, and the trend in layoffs is no longer improving.

Some reports suggest labor market is cooling more than recent payroll numbers indicate

“The buoyancy of nonfarm payroll growth has seemed at odds with other signs that the jobs market is beginning to sour. We look for nonfarm payroll growth to downshift more noticeably in the months ahead, beginning with December’s employment report showing hiring slowing to 205,000.”

“Other gauges of hiring, including the household survey, PMI employment indices and the latest Quarterly Census of Employment & Wages, suggest that the labor market is cooling more than the recent payroll numbers indicate.”

“As we look ahead, the case for additional labor market weakness is clear. If additional labor supply is not forthcoming, it will take softer labor demand to bring nominal wage growth back toward a pace that is consistent with the Fed’s 2% inflation target. This is one reason the FOMC is still contemplating additional rate hikes even as other sources of inflationary pressure, such as spiking gasoline prices and hampered supply chains, have eased in recent months.”

“What remains to be seen is whether the Federal Reserve can engineer just the right amount of labor market cooling such that labor cost growth—and by extension inflation—sufficiently slows without causing a major increase in unemployment.”

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Fed Minutes to reveal divergence between doves and hawks on terminal rate – Citibank

Strategists at Citigroup are of the opinion that the Minutes of the US Federal Reserve (Fed) December meeting could underscore the divergence between doves and hawks on how high the terminal rate should go.

Key quotes

“We will also be looking for any guide on what could determine the size of the hike at the February meeting, but would not expect any concrete guidance.”

“Continue to expect a 50 basis points hike in February.”

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AUD/USD Price Analysis: Bulls retreat from 0.6825-20 hurdle

AUD/USD pares intraday losses at the highest levels in 12 days.
Sluggish RSI, MACD signals also favor pullback moves targeting previous resistance from mid-December.
200-SMA adds to the downside filters, bulls need validation from previous monthly high to keep the reins.

AUD/USD retreats from the short-term key resistance during Monday’s Asian session as bulls take a breather after a three-day uptrend. In doing so, the Aussie pair steps back from a three-week-old horizontal resistance amid nearly overbought RSI and sluggish MACD signals.

It’s worth noting, however, that the previous week’s successful upside break of a descending trend line from November 13, close to 0.6780 by the press time, keeps the AUD/USD buyers hopeful.

Even if the quote breaks the 0.6780 support, the 200-HMA level surrounding 0.6725 acts as the last defense of the AUD/USD buyers before giving control to the Aussie pair sellers.

In that case, the Aussie pair bears could quickly aim for the previous monthly low near 0.6690.

On the contrary, a successful upside break of the three-week-old horizontal resistance area surrounding 0.6820-25 could propel the pair towards the previous monthly high surrounding 0.6895.

Following that, the pair’s successful trading beyond the 0.6900 round figure, as well as September’s high near 0.6920, becomes necessary for the AUD/USD bulls to aim for an August 2022 high of around 0.7135.

Overall, AUD/USD remains on the buyer’s radar but the upside room appears limited.

AUD/USD: Hourly chart

Trend: Pullback expected


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USD/CNY to slump towards 6.65 by end-2023 – ANZ

USD/CNY hovers around the 6.95 level. Economists at ANZ Bank expect the pair to edge lower next year towards 6.65.

Recovery in China’s growth reduces the need for further PBoC’s easing

“Although it will be a bumpy road ahead as China reopens, at least the shift in the narrative from overwhelmingly negative in 2022 towards a more hopeful tone for 2023 will help prompt inflows and encourage exporters’ conversion of accumulated dollar receipts. A recovery in China’s growth reduces the need for further People’s Bank of China easing as well.” 

“We do not foresee a rapid rebound in outbound Chinese tourists at first due to an anticipated backlog in passport applications. This should allay any concerns over potential outflows.”

“We forecast a rebound in the CNY to 6.65 against USD by the end of 2023.”


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EUR/USD Price Analysis: Bearish bias remains intact below 1.0650 hurdle

EUR/USD pares the first daily gains in three during sluggish session.
Clear downside break of weekly support line, sustained trading below 100-SMA favor sellers.
Descending trend line from Tuesday adds to the upside filters.
Weekly horizontal support restricts immediate downside amid steady RSI.

EUR/USD takes offers to consolidate the first daily gains in three around 1.0620 heading into Thursday’s European session. Even so, the major currency pair prints 0.13% intraday gains by the press time.

That said, the quote broke a one-week-old ascending trend line, as well as the 100-Simple Moving Average (SMA), the previous day and favored the bears.

The following corrective bounce off the late Friday’s trough, however, failed to cross the aforementioned hurdles and join the steady RSI (14) to keep sellers hopeful.

As a result, EUR/USD bears are likely to revisit the weekly horizontal support zone surrounding 1.0600, a break of which could quickly drag the quote towards the previous weekly low near 1.0575.

It’s worth noting that the pair’s weakness past 1.0575 will highlight the 1.0440 support level, as well as the monthly low of 1.0393 for the EUR/USD sellers.

On the contrary, the 100-SMA level of 1.0640 precedes the previous support line, around 1.0645 at the latest, to restrict the short-term EUR/USD upside.

Following that, a downward-sloping trend line from Tuesday, close to 1.0650 by the press time, will gain the market’s attention.

In a case where the EUR/USD bulls manage to cross the 1.0650 hurdle, which is less expected, the quote is likely to refresh the monthly high, currently around 1.0735.

EUR/USD: 30-minute chart

Trend: Further downside expected


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USD/CAD finds bids around 1.3500 amid risk aversion theme, oil aims to recapture $80.00

USD/CAD has attempted a recovery after dropping below 1.3500 as the risk-off mood has regained traction.
Firmer oil prices led by growing supply worries as Russia bans oil supply have supported the Canadian Dollar.
The 10-year US Treasury yields have jumped to near 3.85% amid the risk aversion theme.

The USD/CAD pair has sensed buying interest after dropping to near 1.3500 in the early Asian session. The Loonie asset has picked strength as the risk-aversion theme is gaining traction amid volatility in a festive week. The major has shown signs of reversal after displaying a perpendicular downside move on Tuesday as firmer oil prices supported the Canadian Dollar.

The risk profile is highly obscure amid the unavailability of solid triggers for decisive moves in the currency market. Also, easing lockdown restrictions for inbound travelers in China failed to uplift the market mood. S&P500 remained under pressure on Tuesday as tech-savvy stocks faced immense heat. The US Dollar Index (DXY) has turned sideways around 103.80 after failing to cross the crucial resistance of 104.00.

Meanwhile, the risk aversion theme led by illiquid markets due to the festive week is impacting the US Treasury bonds. The 10-year US Treasury yields have jumped to near 3.85%.

The Canadian Dollar hogged the limelight on firmer oil prices. West Texas Intermediate (WTI) futures have dropped marginally but have resumed their upside journey and are expected to recapture the critical resistance of $80.00 led by growing supply worries and China’s progress towards reopening of the economy despite a spike in Covid cases.

Oil supply worries escalated after Russian President Vladimir Putin signed a decree that bans the sale of Russian oil to countries that imposed the oil price cap.

On the United States front, Thomas M. Mertens, a Researcher from the Federal Reserve (Fed) Bank of San Francisco’s Economic Research Department came out with a recession predictor based on macroeconomic time series, particularly the jobless unemployment rate. He cited that no predictors indicate an upcoming recession over the next two quarters currently. And, the jobless rate does not currently signal an impending recession.


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EUR/USD Price Analysis: An explosive holiday season breakout could be on the cards

EUR/USD bears are eyeing the trendline support for an explosive breakout.
The price is being resisted and a break of 1.0575 will likely encourage the bears to target a break of 1.0500. 

As per the prior analysis, EUR/USD Price Analysis: Bears sink in their teeth to test bulls at a critical support structure, the bears are capping the bull’s attempts to break higher. We have seen the price start to coil on the backside of the prior bullish trend but still, the Euro remains on the front side of the more dominant bullish trend as the following will illustrate.

EUR/USD prior analysis

the above showed the prospects of an explosive move below trendline support and given the holidays, a narrow range could still be the fuel for the same in the full trading days between Christmas and New Year.

EUR/USD update

The price is being resisted and a break of 1.0575 will likely encourage the bears to target a break of 1.0500. 

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Gold Price Forecast: XAU/USD licks its wounds ahead of Federal Reserve’s preferred inflation

Gold price prints mild gains to probe sellers after two-day downtrend.
XAU/USD bears stay hopeful as United States economics renew hawkish Federal Reserve bets.
Mixed concerns surrounding geopolitics, Covid join Treasury bond market jitters to probe Gold sellers.
US Dollar needs firmer US PCE Price Index, Durable Goods Orders to stay strong and weigh on Gold price.

Gold price (XAU/USD) makes rounds to $1,793 as bears take a breather after a two-day losing streak during Friday’s sluggish morning. Even so, the yellow metal stays bearish amid hawkish hopes from the Federal Reserve (Fed), especially after the firmer United States statistics. That said, the quote’s latest rebound could be linked to the US Dollar’s retreat as traders await the key US Core Personal Consumption Expenditure (PCE) – Price Index and Durable Goods Orders for November.

United States data renew hawkish Federal Reserve bets, weigh on Gold price

Having witnessed an upbeat start to Thursday, Gold price witnessed heavy selling as the US data renewed hawkish expectations from the US Federal Reserve and propelled the US Dollar. That said, the US economy expanded at an annualized rate of 3.2% in the third quarter (Q3), per the final readings of the Gross Domestic Product (GDP), versus 2.9% previous estimates. Further, the Personal Consumption Expenditure (PCE) Prices match 4.3% QoQ estimations during Q3 2022 whereas the Core PCE improved to 4.7% QoQ versus 4.6% market forecasts.

Mixed geopolitics, bond market updates trouble XAU/USD traders

Contrary to the firmer United States data, risk-on mood and downbeat Treasury yields weighed on the US Dollar, which in turn allowed Gold price to pare losses. The same could be linked to the sentiment-positive headlines from China and mixed US data, as well as the Bank of Japan’s (BOJ) another unscheduled bond operation.

That said, the US Senate’s passage of a $1.7 trillion government funding bill and the latest comments from US President Joe Biden showing readiness to tame inflation also add filters to the Gold price moves.

Firmer US statistics to please Gold sellers

Although the recent inaction in the market allows Gold traders to portray indecision, the likely upbeat prints of the US inflation and output-related data could allow the XAU/USD bears to tighten their grip.

Forecasts suggest that the US Core Personal Consumption Expenditure (PCE) – Price Index, the Federal Reserve’s preferred inflation gauge, will join the monthly Durable Goods Orders to offer the one last shot of market activity before witnessing the holiday-linked inaction. Forecasts suggest that the US Core PCE Price Index remains unchanged at 0.2% MoM. However, the Annualized forecasts suggest softer figures of 4.7% YoY versus 5.0% previous readings. Further, US Durable Goods Orders could register a contraction of 0.6% in November compared to the previous increase of 1.1% (revised from 1.0%).

Gold price technical analysis

Gold price remains on the bear’s radar as it broke a one-week-old ascending trend line and the 50-Simple Moving Average (SMA) the previous day, after forming a “double top” bearish chart formation around $1,825.

Adding strength to the downside bias is the absence of the oversold conditions for the Relative Strength Index (RSI), located at 14, as well as the bearish signals from the Moving Average Convergence and Divergence (MACD) indicator.

That said, the Gold price can ignore the latest rebound unless the commodity stays below a convergence of the 50-SMA and previous support line from December 16, close to $1,799 by the press time. Also challenging the upside filter is the $1,800 threshold.

Following that, the recovery moves could aim for the “double tops” marked around $1,825, a break of which will give control to the Gold buyers targeting June’s peak surrounding $1,880.

On the contrary, a three-week-old ascending support line, near $1,779 at the latest, lures intraday sellers of the Gold. However, the likely oversold conditions of the RSI around there could join the 200-SMA, near $1,772 by the press time, to challenge the XAU/USD bears afterward.

Ina case where the Gold price remains bearish past $1,772, the odds of witnessing a slump toward the monthly low near $1,765, and then a battle with the multiple supports near $1,760, can’t be ruled out.

Overall, the Gold price remains on the bear’s radar despite the latest corrective bounce.

Gold price: Four-hour chart

Trend: Further downside expected


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Canada: Inflation is easing, but progress in November was slower than expected – CIBC

Data released on Wednesday in Canada showed the annual inflation rate dropped from 6.9% to 6.8%. Analysts at CIBC, point out that inflation is easing but is a slower progress than what probably the Bank of Canada was hoping for. 

Key Quotes: 

“The 6.8% headlinethanual rate was only a tick lower than the prior month and slightly above the consensus expectation (6.7%). Of greater concern to policymakers, however, is that the easing in core measures of inflation (including CPI-trim, median and ex food/energy) appears to have stalled at levels still above those that would be consistent with a 2% inflation target. We would like to see signs of a deceleration in core measures when the December data are released to be more confident in our view that the Bank will pause its rate hiking cycle at the January meeting (which is a week after the next CPI release).

“The good news is that inflation is easing, and that will become more noticeable when the big monthly increases seen this spring start to drop out of the annual calculation next year. However, the bad news is that it is slower progress than we and maybe even the Bank of Canada was hoping for. We still expect no change in interest rates at the January meeting, although it would be nice to see a deceleration in some core measures of inflation in next month’s release to be more confident in that call.” 

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